United States District Court, N.D. Texas, Dallas Division
SAUNDERS FAMILY VENTURES, LLC, et al., Plaintiffs-counterdefendants,
DOMESTIC NATURAL RESOURCES, LLC, Defendant-counterplaintiff, and RICHARD OLIVERI, ERICK BOYLE, RYAN BOYLE, and BRICE LeBLANC, Defendants.
MEMORANDUM OPINION AND ORDER
A. FITZWATER UNITED STATES DISTRICT JUDGE.
action alleging federal and Texas securities fraud and
related claims arising out of an oil-drilling joint venture,
defendants move for summary judgment and one plaintiff moves
for partial summary judgment. For the reasons that follow,
the court grants defendants' motion in part and denies it
in part, and it denies the plaintiff's motion for partial
lawsuit is brought by plaintiffs-counterdefendants Saunders
Family Ventures, LLC (“Saunders”), Monticello
Capital Partners, LLC (“Monticello”), and Samuel
J. Snead, Jr. (“Snead”) against
defendant-counterplaintiff Domestic Natural Resources, LLC
(“Domestic”) and defendants Richard Oliveri
(“Oliveri”), Erick Boyle (“Erick”),
Ryan Boyle (“Ryan”), and Brice LeBlanc
(“LeBlanc”). It arises from investments that
plaintiffs made in the Jordan Celeste Prospect #1
(“JCP#1”), a joint venture in Kent County,
Texas.Domestic is the managing venturer of JCP#1,
and Oliveri, Erick, Ryan, and LeBlanc were managers or
employees of Domestic. Between late 2013 and late 2014,
defendants solicited investments from plaintiffs to develop
the JCP#1 into a full oil-drilling operation. Plaintiffs
received marketing materials, including a detailed
confidential information memorandum (“Confidential
Memorandum”), that laid out the parameters of the
venture. The Confidential Memorandum noted that the JCP#1 was
divided into 35 units sold at $44, 700 per unit. Each unit
entitled the holder to a 2.82% working interest and a 1.28%
net revenue interest (“NRI”) in JCP#1. After
receiving the Confidential Memorandum, plaintiffs signed a
venture agreement (“Venture Agreement”) with
Domestic to govern the relationship. Each plaintiff invested
separately in the venture and only later discovered the
identities of the others.
allege that the entire venture-from solicitation to
execution-“was riddled with fraud[.]” Ps. Br. 16.
Snead contends that he was first brought into the venture by
Bill Steinmetz (“Steinmetz”), who Snead alleges
portrayed himself as someone who had already invested in
JCP#1. Snead initially invested $100, 000 for 2.73 units in
JCP#1, corresponding to an NRI of 3.5%. After Snead made his
investment, Domestic continued to solicit him to make a
larger investment that would grant him a higher tier of
ownership. Snead agreed to invest the additional sum of $200,
000 in exchange for “20% of the total gross
processed”from the JCP#1. Snead App. 84. Snead
believed that this entitled him to a payout calculated as 20%
of all proceeds from the well, to be determined before other
investors' interests were calculated.
Snead made this additional investment, defendants sent him a
letter that incorrectly stated his interest in the JCP#1.
Snead called defendants to request an explanation, and he
alleges they never responded. Domestic also sent Snead
various documents, including a June 1, 2015 Certificate of
Ownership, that stated that he had a 15% NRI in the JCP#1.
Internal records submitted by defendants show, however, that
Snead has the equivalent of a 20% NRI. Domestic contends that
the distinction between NRI and total gross processed is
contrast to Snead, Saunders and Monticello did not invest in
a higher tier; they contend that defendants did not disclose
that there was an additional tier of investors. Saunders and
Monticello invested $60, 000 and $42, 857.14, respectively,
and according to the JCP#1's books, they were given
larger shares of NRI than under the terms set forth in the
to plaintiffs, various issues arose with the operation of the
JCP#1 after they made their initial
investments. Domestic decided to use BDI Operating, LLC
(“BDI”) as the drilling contractor, who was
responsible for the actual operation of the JCP#1 well, and
plaintiffs allege that they were not told that Oliveri,
Erick, and Ryan are the only managing members of BDI.
Defendants contend that they did disclose this to Snead, and,
in any event, that this information was readily available
through state corporate records. Plaintiffs also allege that
defendants solicited additional contributions to drill
additional wells based on misrepresentations and forgeries.
Defendants deny this accusation.
seek to recover from defendants on twelve causes of action
alleged in their amended complaint. Domestic has filed a
contingent counterclaim against plaintiffs, seeking to
recover under the Venture Agreement its attorney's fees,
expert witness fees, and all costs of the proceeding, should
it prevail in this lawsuit. Snead moves for partial summary
judgment on plaintiffs' third cause of action
(“count III”) as it pertains to his investment in
JCP#1. Defendants move for summary judgment on all 12 of
plaintiffs' claims. Both motions are opposed.
summary judgment movant will not have the burden of proof on
a claim at trial, it can obtain summary judgment by pointing
the court to the absence of evidence on any essential element
of the nonmovant's claim. See Celotex Corp. v.
Catrett, 477 U.S. 317, 325 (1986). Once it does so, the
nonmovant must go beyond his pleadings and designate specific
facts demonstrating that there is a genuine issue for trial.
See Id. at 324; Little v. Liquid Air Corp.,
37 F.3d 1069, 1075 (5th Cir. 1994) (en banc) (per curiam). An
issue is genuine if the evidence is such that a reasonable
jury could return a verdict for the nonmovant. Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The
nonmovant's failure to produce proof as to any essential
element renders all other facts immaterial. See TruGreen
Landcare, L.L.C. v. Scott, 512 F.Supp.2d 613, 623 (N.D.
Tex. 2007) (Fitzwater, J.). Summary judgment is mandatory
where the nonmovant fails to meet this burden.
Little, 37 F.3d at 1076.
entitled to summary judgment on a claim or defense for which
it will have the burden of proof, a party “must
establish ‘beyond peradventure all of the essential
elements of the claim or defense.'” Bank One,
Tex., N.A. v. Prudential Ins. Co. of Am., 878 F.Supp.
943, 962 (N.D. Tex. 1995) (Fitzwater, J.) (quoting
Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th
Cir. 1986)). This means that it must demonstrate that there
are no genuine and material fact disputes and that it is
entitled to summary judgment as a matter of law. See
Martin v. Alamo Cmty. Coll. Dist., 353 F.3d 409, 412
(5th Cir. 2003). “The court has noted that the
‘beyond peradventure' standard is
‘heavy.'” Carolina Cas. Ins. Co. v.
Sowell, 603 F.Supp.2d 914, 923-24 (N.D. Tex. 2009)
(Fitzwater, C.J.) (quoting Cont'l Cas. Co. v. St.
Paul Fire & Marine Ins. Co., 2007 WL 2403656, at *10
(N.D. Tex. Aug. 23, 2007) (Fitzwater, J.)).
national and local summary judgment rules dictate how a party
who opposes summary judgment must cite the summary judgment
record. Fed.R.Civ.P. 56(c)(1)(A)
in relevant part: “A party asserting that a fact . . .
is genuinely disputed must support the assertion by: (A)
citing to particular parts of materials in the record,
including depositions, documents, electronically stored
information, affidavits or declarations, stipulations
(including those made for purposes of the motion only),
admissions, interrogatory answers, or other
materials[.]” Rule 56(c)(3) states, in relevant part:
“[t]he court need consider only the cited
materials[.]” Rule 56(e) provides:
[i]f a party fails to properly support an assertion of fact
or fails to properly address another party's assertion of
fact as required by Rule 56(c), the court may: (2) consider
the fact undisputed for purposes of the motion; [and] (3)
grant summary judgment if the motion and supporting
materials-including the facts considered undisputed-show that
the movant is entitled to it[.]
And N.D. Tex. Civ. R. 56.5(c) states: “[w]hen citing
materials in the record, as required by Fed.R.Civ.P.
56(c)(1)(A) or (B), a party must support each assertion by
citing each relevant page of its own or the opposing
“Rule 56 . . . saddles the non-movant with the duty to
‘designate' the specific facts in the record that
create genuine issues precluding summary judgment, and does
not impose upon the district court a duty to survey the
entire record in search of evidence to support a
non-movant's opposition.” Arrieta v. Yellow
Transp., Inc., 2008 WL 5220569, at *2 n.3 (N.D. Tex.
Dec. 12, 2008) (Fitzwater, C.J.) (quoting Jones v.
Sheehan, Young & Culp, P.C., 82 F.3d 1334, 1338 (5th
Cir. 1996)), aff'd sub nom. Hernandez v. Yellow
Transp., Inc., 670 F.3d 644 (5th Cir. 2012).
“[T]he court is not obligated to comb the record in
search of evidence that will permit a nonmovant to survive
summary judgment.” Id. (citing Adams v.
Travelers Indem. Co. of Conn., 465 F.3d 156, 164 (5th
parties have filed separate statements of facts that they
contend are required by rule. The court disagrees. The
applicable Federal Rules of Civil Procedure do not require
that such statements be filed. This court's local civil
rules at one time provided that “[a] motion for summary
judgment must list in numerical order: (1) the undisputed
facts upon which the motion relies; and (2) the issues of
law.” N.D. Tex. Civ. R. 56.1(a) (1997) (amended 1998).
And they required that “[a] response to a motion for
summary judgment must list in numerical order: (1) the
disputed facts upon which the response relies; and (2) the
disputed issues of law.” N.D. Tex. Civ. R. 56.1(b)
(1997) (amended 1998). But these requirements were abrogated
effective April 15, 1998. Since then, the court's local
summary judgment rules have limited the summary judgment
filings to motions, responses, replies, briefs, and
appendixes. The Rules neither require nor permit separate
listings of disputed and undisputed issues of fact and law or
the filing of pleadings like the parties' statements of
fact. Moreover, N.D. Tex. Civ. R. 56.7 provides that
“[e]xcept for the motions, responses, replies, briefs,
and appendixes required by these rules, a party may not,
without the permission of the presiding judge, file
supplemental pleadings, briefs, authorities, or
evidence.” Accordingly, the court has not considered
any arguments contained in the parties' statements of
court turns first to the grounds of defendants' motion
that are addressed to plaintiffs' first (“count
I”) and second (“count II”) causes of
action. In count I, plaintiffs allege a claim for fraud in
connection with the purchase or sale of securities, in
violation of § 10(b) the Securities Exchange Act of 1934
(“Exchange Act”), 15 U.S.C. § 78j(b), and
Securities and Exchange Commission Rule 10b-5 promulgated
thereunder, 17 C.F.R. § 240.10b-5. In count II, they
allege that Oliveri, Erick, Ryan, and LeBlanc are liable
under the federal securities laws as control persons.
10(b) and Rule 10b-5 prohibit making any material
misstatement or omission in connection with the purchase or
sale of any security.” Ludlow v. BP, P.L.C.,
800 F.3d 674, 681 (5th Cir. 2015) (quoting Halliburton
Co. v. Erica P. John Fund, Inc., __U.S.__, 134 S.Ct.
2398, 2408 (2014) (internal quotation marks omitted)). To
recover under § 10(b) and Rule 10b-5, plaintiffs must
prove: “(1) a material misrepresentation or omission by
the defendant; (2) scienter; (3) a connection between the
misrepresentation or omission and the purchase or sale of a
security; (4) reliance upon the misrepresentation or
omission; (5) economic loss; and (6) loss causation.”
John Fund, 134 S.Ct. at 2407 (citations and internal
quotation marks omitted).
allege that defendants are liable under § 10(b) and Rule
10b-5 because they made various “untrue statements of
material fact and/or omissions [of] material fact upon which
Plaintiffs reasonably relied.” Am. Compl. ¶ 203.
They assert that various misrepresentations and omissions
occurred both before and after they invested in the JCP#1.
Although the court is unable to discern from plaintiffs'
briefing all of the specific misrepresentations on which they
rely,  it need not analyze each potential
misrepresentation or omission because plaintiffs have failed
to submit sufficient evidence to enable a reasonable trier of
fact to find that defendants acted with
establish under § 10(b) and Rule 10b-5 that a defendant
acted with scienter, the plaintiff must prove that the
defendant made a misrepresentation or omission with “an
intent to deceive, manipulate, or defraud [or with] severe
recklessness[.]” Southland Sec. Corp. v.
INS pire Ins. Solutions, Inc., 365 F.3d 353, 366 (5th
Cir. 2004) (quoting Broad v. Rockwell Int'l
Corp., 642 F.2d 929, 961-62 (5th Cir. Apr. 1981) (en
banc)) (internal quotation marks omitted). To amount to
severe recklessness, a misrepresentation or omission must be
“an extreme departure from the standards of ordinary
care, ” and must present “a danger of misleading
buyers or sellers which is either known to the defendant[s]
or is so obvious that the defendant[s] must have been aware
of it.” Broad, 642 F.2d at 961-62. “For
purposes of determining whether a statement made by [a]
corporation was made by it with the requisite Rule 10(b)
scienter . . . [the court] look[s] to the state of mind of
the individual corporate official or officials who [made,
issued, or approved] the statement[.]”
Southland, 365 F.3d at 366.
only possible evidence of scienter that plaintiffs have
submitted is that defendants failed to disclose to Snead that
Steinmetz “was really a paid agent of
Defendants.” Ps. Br. 9 (the “Steinmetz
Misrepresentation”). Plaintiffs point to financial records
and communication records as proof that Steinmetz was not a
co-investor, as Snead believed. Therefore, according to
plaintiffs, Steinmetz misrepresented the investment
opportunity and fraudulently induced Snead to invest.
Plaintiffs maintain that “[a] rational trier of fact
could infer from this evidence that Steinmetz was a shill,
posing as an enthusiastic customer to rope in investors.
Steinmetz's covert arrangement with the Defendants is
evidence that Defendants acted with a mental state embracing
an intent to deceive, manipulate, or defraud[.]”
Id. Plaintiffs appear to aver that the Steinmetz
Misrepresentation is sufficient to meet the scienter
requirement for all misrepresentations or omissions
associated with their investments in the JCP#1. The court
establish that the defendant in question is liable under
§ 10(b) and Rule 10b-5, plaintiffs must prove for each
alleged misrepresentation or omission that the defendant
acted with scienter. See Wu v. Tang, 2011 WL 145259,
at *5 (N.D. Tex. Jan. 14, 2011) (O'Connor, J.)
(“Plaintiffs must show the requisite level of scienter
for each claim.”); see also Southland, 365
F.3d at 373 (analyzing each alleged misrepresentation
individually to determine whether plaintiffs sufficiently
pleaded facts to raise strong inference of scienter). At
most, plaintiffs have submitted evidence that the Steinmetz
Misrepresentation would enable a reasonable trier of fact to
find scienter for a misrepresentation of Steinmetz's